Best place to save lump sum?

allmannerofthings

I have £11,000 which is my emergency fund. Currently it's in a Nationwide account at 0.10% interest so I want to put it somewhere where it will get more interest. I've been reading the savings section of the website but I am pretty confused.

I don't want to save it in a current account, where I will have to have direct debits on the account and also pay in so much a month.

I don't want to save a monthly amount in the account, just to put the £11,000 in there for dire emergencies.

I need the money to be accessible, but not immediately - I have other money elsewhere for smaller emergencies such as needing to replace a large appliance, etc. Basically the £11,000 would be used to pay our expenses for a few months if my husband was out of work, which we hope won't happen, but if it did I would need to start using the money certainly within 3 months or so of him being made redundant. Hopefully, we won't have to use it at all.

I'm also wary of using small banks I've never heard of.

Could anyone advise me as to the best place to put the money? Thank you x

AlanP_2

TBH your best bet is those Current Accounts and Regular Savers you don't want to use as they are paying the best rates.

You could open a Nationwide Flex Account (5% for 1 year) and deposit £2500 each along with a couple of Tesco accounts (3k each at 3%).

That accounts for your £11k. All you need to do then is setup a regular transfer of £1k per month from Tesco-A to NW-A and from Tesco-B to N/W-B to meet the Ts&Cs.

Setup a reverse transfer from each of the N/W accounts for the next day and that's it.

Once a month sign in to each account and transfer out the interest earned to somewhere else (a joint Tesco maybe) so that you earn interest on the interest.

Takes a few minutes to go through online account opening and sign a few forms when they send them out to you, then say 5 minutes on each account to setup regular transfers and 10 minutes a month to syphon off the interest.

5K @ 5% pa = £250
6K @ 3% pa = £180 as a minimum



Personally I would transfer the £6k from Tesco across to N/W Regular Savers on a monthly basis as they pay a higher rate, starting a new one each year.

BTW - Include any other "emergency /spare" cash as appropriate to maximise returns on that as well (can have Joint N/W or 2 Tescos per person).

After 1 year re-assess what is available as N/W rate will certainly drop.

chockydavid1983

For those accounts that require a certain number of direct debits to be paid out, if you don't have enough to go around all the accounts you want, you can open Tesco internet and instant access savers and direct debit to yourself each month:
http://www.tescobank.com/savings/flexible/

allmannerofthings

Thank you for such a comprehensive reply, AlanP. I haven't done this before and find it quite daunting and confusing.

My husband and I already bank with Nationwide, we have FlexAccounts. Looking at their website it gives us the option to change to FlexDirect.

I don't work and so the only money coming in to my FlexAccount on a regular basis is transferred from my husband's account, which further complicates things as money transferred from another Nationwide account doesn't count, apparently, so would do as you suggest and transfer it in from Tesco or something.

I am concerned about mixing our emergency money together with spending money and direct debits for bills, in our current accounts. This is why I was hoping for a simpler option...

allmannerofthings

Thanks, chockydavid. I think the 3 direct debits that have to come out of the Tesco current account can't be paid into a Tesco savings account.... I really find this horrendously convoluted. Determined to get my head around it!

System

Or an offset mortgage perchance?

allmannerofthings

I don't know anything about those at all. I've only just taken out a mortgage of £115,000 - first payment due later this month.

chockydavid1983

Debra wrote: »

Thanks, chockydavid. I think the 3 direct debits that have to come out of the Tesco current account can't be paid into a Tesco savings account.... I really find this horrendously convoluted. Determined to get my head around it!

Ah yes, they would only work for non Tesco current accounts.
Another option is to set up a DD to a charity for £1 per month.
Haha, yep I was the same at the start but been doing it for so long now it's become second nature. Persevere! :-).

System

Offset could be an option for the future, it's essentially like a cash account at the rate of your mortgage, as what's in the account is subtracted from the owing to reduce the interest

But if you can get better cash rates, go for that

And when you feel like you have enough emergency fund, perhaps start a stocks &shares ISA for the long term or extra pension contributions, unless you plan on needing the cash in less than 5 years. Investment massively outperforms mortgage overpayment in the long term

Personally my only emergency fund is my credit card and the rest goes into a either Vanguard Global small cap fund or an F&c leveraged property fund i have in my sipp and isa

SallySunshine

Debra, if you don't need the money immediately and don't want to do various transfers in and out, you could look at SecureTrust Bank 90day notice account at 1.25% or their 120day notice at 1.35%.

AlanP_2

Debra wrote: »

Thank you for such a comprehensive reply, AlanP. I haven't done this before and find it quite daunting and confusing.

My husband and I already bank with Nationwide, we have FlexAccounts. Looking at their website it gives us the option to change to FlexDirect.

I don't work and so the only money coming in to my FlexAccount on a regular basis is transferred from my husband's account, which further complicates things as money transferred from another Nationwide account doesn't count, apparently, so would do as you suggest and transfer it in from Tesco or something.

I am concerned about mixing our emergency money together with spending money and direct debits for bills, in our current accounts. This is why I was hoping for a simpler option...

Don't mix it up then - open separate N/W 5% current accounts and 3% Tesco accounts to hold the emergency funds and leave your existing accounts as they are for day-day spending.

It can seem complex and daunting to start with but once it is up and running it is quite straightforward and essentially self-managing (apart from harvesting off the interest earned).

If you come up with a "plan" post it on here for comment and then crack on and set it all up.